- S&P 500 futures open with a bearish gap on Monday amid concerns about a prolonged war in the Middle East.
- Iran named Mojtaba Khamenei as the new Supreme Leader, raising the risk of a further escalation of tensions.
- A massive rally in Oil prices fuels inflation concerns and further tempers investors’ appetite for riskier assets.
S&P 500 futures plummeted nearly 2.5% during the Asian session on Monday as worries about the effects of a protracted Middle East war on Crude Oil prices and the global economy continue to weigh on investors’ sentiment.
The joint US-Israeli campaign against Iran enters its tenth day, with no signs of an end to hostilities. Moreover, Iran named Mojtaba Khamenei as the new Supreme Leader just over a week after Ayatollah Ali Khamenei was killed in US-Israeli strikes, signaling hardliners remain firmly in charge. Investors are bracing for a long stretch of war as the move is a direct rebuke to US President Donald Trump, who had declared the son “unacceptable”.
Meanwhile, tankers are still not daring to cross the Strait of Hormuz, fueling concerns over supply disruptions and triggering a massive rally of over 25% in Crude Oil prices. This raises the risk of energy-driven inflation, which could result in a more hawkish tilt from major central banks, including the US Federal Reserve (Fed). Adding to this, higher oil prices could disrupt economic activity, further tempering investors’ appetite for riskier assets.
Traders now look forward to this week’s release of the latest US consumer inflation figures for more cues about the Fed’s rate-cut path. The focus, however, will remain glued to geopolitical developments, which will continue to play a key role in influencing the broader market risk sentiment.
